Business

Report: NC small businesses have reduced access to loans

After Great Recession, capital is restricted

Published Tuesday, January 24, 2017 10:00 pm

by Stephanie Carson, N.C. News Service

RALEIGH – Many of the more than 800,000 small businesses in North Carolina count on capital from bank loans to grow. But a new report released Tuesday by the Woodstock Institute finds the number of bank loans issued to small businesses is on the decline.

Specifically, small-business loans in Chicago and Los Angeles were studied, but Michelle Sternthal, the director of policy and government affairs for the Main Street Alliance, a network of small-business coalitions, says it's indicative of a national trend.

“Small businesses are really struggling to access capital,” she said. “Bank loans are necessary for community development, businesses without adequate access to capital fail to grow, can’t hire workers, cannot invest in expanding the business. And so, we see this as a massive problem.”

According to data reported under the Community Reinvestment Act, small-business lending dropped drastically during the Great Recession, and has increased slowly since then. The number of loans in 2014 was down nearly 60 percent from its peak in 2007.

In addition to a decrease in the number of loans, the report also says across the country, businesses in low-income census tracts made up almost 10 percent of all businesses, but received less than five percent of the loans reported. Sternthal says the disparity adds to the challenge of economic growth.

“So, the areas that most need the infusion of resources and the entrepreneurship are the very ones that are being starved of this valuable capital,” she said.

If loans were increased in low-income areas, the report estimates the businesses it studied would have received $8 billion more in capital. The report urges regulators in charge of making sure banks comply with the Community Reinvestment Act to take a closer look at the types of loans banks are offering to meet the needs of small businesses.